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DAILY US OPENING NEWS - 04/11/11

·      The confidence vote in the Greek Parliament today remains a key risk event

 

·      Lackluster services PMI data from the Eurozone, together with a sharp decline in German factory orders dented appetite for risk

 

·      ECB's Stark said Thursday's decision to cut rates had nothing to do with pragmatism, and does not signal change in the strategy, adding that we could see negative surprises in the economy

 

·      CAD came under pressure across the board following an unexpected decline in the net change in employment data from Canada, together with an increase in the country’s unemployment rate

 

·      Markets look ahead to the Nonfarm Payrolls report from the US later in the session

 

·      RANsquawk European Morning Briefing Video: http://www.youtube.com/watch?v=Tn3J5oAzYQM

 

Market Re-Cap

 

European equities traded in positive territory for a vast majority of the session as prospects for a referendum in Greece faded, together with upbeat comments in a G20 draft communiqué. However, gains were capped as uncertainty persisted over results of the confidence vote in the Greek parliament today, lacklustre services PMI data from the Eurozone as well as weaker German factory orders, and ahead of the Nonfarm Payrolls report from the US. Strength in equities weighed on Bunds, whereas the Eurozone 10-year government bond yield spreads remained generally tighter. In the forex market, CHF came under pressure on the back of market talk that the SNB may raise its EUR/USD floor, whereas weakness was observed in AUD overnight after the RBA slashed its inflation and growth forecasts for 2011.

 

Moving into the North American open, the NFP report from the US remains the focus, however market participants will also keep a close eye on the outcome of the confidence vote in Greece. In fixed income, another Fed's Outright Treasury Coupon Purchase operation in the maturity range of Nov'17-Aug'19, with a purchase target of USD 4.25-5bln is also scheduled for later in the session.

 

Asian Headlines:

 

China has achieved a soft landing for its economy, which will maintain steady growth in the 8% range in 2012, according to an influential government economist Fan Gang. He further said that the Chinese growth could reach 8%-8.5% in 2012. (China Securities Journal)

 

Global Headlines:

 

According to a PBOC adviser, Li Daokui, China should await workable plans from Europe before Beijing puts money into any bailout package, adding that China should insist on “certain controls” over how the money will be used. He further said that China would also likely work with other BRICS countries in possible moves to help Europe overcome its debt crisis. (RTRS)

 

In other news, according to a G20 draft action plan, US commits to timely near term measures to sustain economic recovery, adding that  the G20 commits to move more rapidly towards market determined exchange rate systems, and welcomes China's determination to increase exchange rate flexibility. (RTRS)

 

US Headlines:

 

House speaker Boehner said some additional revenue could be part of a deficit deal being negotiated by lawmakers, as long as it also includes significant reforms to benefits programmes. (RTRS)

 

In other news, US Fed balance sheet liabilities were USD 2.805trl as of Nov 2 vs. last week’s USD 2.829trl, Fed holdings of treasuries totalled USD 1.652trl as of Nov 2 vs. last week’s USD 1.678trl and Fed holdings of agency debt and MBS were unchanged on the week at USD 107.7bln and USD 849.3bln respectively. (RTRS)

 

Elsewhere, the Monster jobs index for October showed a positive annual growth trend at 11% Y/Y in October. (Sources)

 

EU and UK Headlines

 

ECB’s Stark said that the ECB’s government bond purchases set wrong incentives to governments, and the ECB should end the programme as soon as possible. (RTRS)

 

A rebellion is emerging within Italian Prime Minister Silvio Berlusconi's conservative party that could have enough force to threaten his governing majority in Parliament, said people familiar with the matter—exacerbating the premier's struggle to steer Italy through the euro-zone debt crisis. (WSJ)

 

·       German Factory Orders SA (Sep) M/M -4.3% vs. Exp. 0.1% (Prev. -1.4%)

·       German Factory Orders NSA (Sep) Y/Y 2.4% vs. Exp. 7.5% (Prev. 3.9%, Rev. 4.0%)

·       Eurozone Services PMI (Oct F) M/M 46.4 vs. Exp. 47.2 (Prev. 48.8)

·       German Services PMI (Oct F) M/M 50.6 vs. Exp. 52.1 (Prev. 49.7)

·       French Services PMI (Oct F) M/M 44.6 vs. Exp. 46.0 (Prev. 51.5)

·       Italian Services PMI (Oct F) M/M 43.9 vs. Exp. 45.0 (Prev. 45.8) (RTRS)

 

EQUITIES

 

European equities traded in positive territory for a vast majority of the session as prospects for a referendum in Greece faded, together with upbeat comments in a G20 draft communiqué. However, gains were capped as uncertainty persisted over results of the confidence vote in the Greek parliament today, lacklustre services PMI data from the Eurozone as well as weaker German factory orders, and ahead of the Nonfarm Payrolls report from the US. Moving into the North American open, European equities are trading mixed, with basic materials and health care as the best performing sectors.

 

**Note: For US equities news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

 

Index

DAX

CAC

FTSE

EUROSTOXX

SMI

Level

6099.47

3190.66

5581.7

2347.13

5695.44

Change (ticks)

-33.71

-4.81

36.06

-0.81

27.39

 

FX

 

CHF came under pressure on the back of market talk that the SNB may raise its EUR/USD floor, whereas weakness was observed in AUD overnight after the RBA slashed its inflation and growth forecasts for 2011. In other news, CAD weakened across the board following an unexpected decline in net change in employment data from Canada, as well as an increase in the unemployment rate, which also observed USD/CAD rising around 60 pips.

 

It is worth noting that the RBA trimmed its outlook for economic growth to 2.75% for 2011 from its previous forecast of 3.25%. Underscoring great uncertainty in the outlook the RBA gave a range of 3.0%-3.5% for its end-2012 growth forecast and 3%-4% for 2013. This compared with the August call for 3.75% growth in both 2012 and 2013. The central bank also cut its underlying inflation forecast to 2.5% for 2011 from an earlier estimate of 3.25%. (RTRS)

 

·       Canadian Net Change in Employment (Oct) M/M -54.0K vs. Exp. 15.0K (Prev. 60.9K)

·       Canadian Unemployment Rate (Oct) M/M 7.3% vs. Exp. 7.1% (Prev. 7.1%) (RTRS)

 

Currency

EURUSD

GBPUSD

USDJPY

Level

1.3845

1.6029

78.04

Change (pips)

0.0022

-0.0012

-0.0200

 

COMMMODITIES

 

WTI and Brent crude futures remained in positive territory for a vast majority of the European session as the prospects for a referendum in Greece faded, and as the USD-Index traded near flat.

 

Geopolitical News:

 

·       Israel has staged a mass drill, simulating a missile attack in the centre of the country at a time of intense speculation that it could launch strikes on Iran, although the military dismissed any link. In other news, Israel has announced that its navy will attempt to stop two boats carrying pro-Palestinian activists bound for the Gaza Strip, in the latest attempt by activists to break the four-year Israeli blockade against the territory.

 

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

 

Commodity

WTI Nymex

OTC Spot Gold

Level

94.68

1761.13

Change (NYSEARCA:USD)

0.61

-2.70

 

LOOKING AHEAD

 

Economic Releases

 

CDT

GMT

 

DATA

EXP

PREV

0730

1230

US

Change in Non-Farm Payrolls M/M (Oct)

95K

103K

0730

1230

US

Change in Manufacturing Payrolls M/M (Oct)

2K

-13K

0730

1230

US

Change in Private Payrolls M/M (Oct)

125K

137K

0730

1230

US

Unemployment Rate M/M (Oct)

9.1%

9.1%

0730

1230

US

Average Hourly Earning M/M (Oct)

0.2%

0.2%

0730

1230

US

Average Hourly Earning Y/Y (Oct)

1.8%

1.9%

0730

1230

US

Average Weekly Hours M/M (Oct)

34.3

34.3

0730

1230

CA

Building Permits M/M (Sep)

2.6%

-10.4%

0900

1400

CA

IVEY PMI M/M (Oct)

55.4

55.7

0930

1430

US

ECRI Weekly Index W/W (Nov 4)

 

121.3

0930

1430

US

ECRI Weekly Annualised Y/Y (Nov 4)

 

-10.0%

1200

1700

US

Baker Hughes Rig Count W/W (Nov 4)

 

2021

N/A

N/A

UK

New Car Registrations Y/Y (Oct)

 

-0.8%

 

Speakers

0800

1300

GE

Deputy Finance Minister Asmussen

1200

1700

US

Fed’s Tarullo (Voting Member)

N/A

N/A

WLD

G20 Meeting in Cannes

 

Auction

1000

1500

US

Fed’s Outright Trea. Coup. Purch. Nov’17-Aug’19 (USD 4.25-5bln)

 

**Note: USD-Index November options expiry

              As the UK clock has moved to GMT, RANdesk will close at 2100GMT (1600CDT)

 

Prices taken at 1141GMT